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The Cost of Scale

"A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll...Companies pay a price when their leaders ignore things that may be fracturing their foundation."

- Howard Schultz; ceo, Starbucks

Before Howard Schultz stepped back into the pilot’s chair of daily operations of the most prolific coffee brand on planet earth, he wrote a memo to his Starbucks leadership team. In short, Starbucks had backslid.

They had watered down their true value proposition - delighting customers and fostering emotional connection. The core differentiators that had made America fall in love with their coffee experience.

The memo - titled “The Commoditization of the Starbucks Experience” - was followed by his eventual reinstatement as ceo (they intentionally un-capitalize all titles) and a time when he made one of the the toughest decisions any shot-caller could imagine.

He made the decision to close all their stores.

On the same day.

At the same time.

To say that the risk was significant would’ve been a gross understatement.

The goal was to retrain their baristas - re-energizing them with his trust and confidence as brand ambassadors, not just espresso pourers. His aim was to bestow a sense of ownership of the Starbucks brand and reclaim the "Starbucks Experience” once again.

The decision to close every store cost them about 6 million dollars in three hours. Six mil in 3 hours. That’s like (…carry the one…), two million dollars an hour. The sacrifice made in the name of revitalizing the soul of what had made them the giant they are is astonishing and admirable.

Here’s the memo which catalyzed this journey of rediscovery:

Over the past 10 years, in order to achieve the growth, development and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks Experience, and what some might call the commoditization of our brand.

Many of these decision were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces.

It was never my intent to attack or to assign blame. We were all responsible for the problems I saw surfacing and was about to air. Our problems were in large part, self-induced, and I desperately wanted all of our leaders to feel the level of distress that I felt knowing that Starbucks was under attack, mostly from within.

A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.

From Onward by Howard Schultz(bolding ours)

If one of our primary objectives is to delight others (hint: it most unequivocally is, regardless of your organization’s function, mission, or vision).

Delightion (is that a word?) should must be be baked into the fabric of everything we do. So we ask:

What is the cost of scaling and growing?

What may we be sacrificing in terms of brand experience and delightion for the sake of growth (like Starbucks did)?

How may we preserve the texture and flavor of our brands while still pushing the growth envelope?